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TheStreet Open House

Asia Stocks Down On US Manufacturing Report

By PAMELA SAMPSON

BANGKOK (AP) â¿¿ World stock markets meandered Tuesday as traders weighed a surprise drop in U.S. factory production against hopes that the U.S. will avoid the so-called fiscal cliff.

U.S. manufacturing shrank in November to its weakest level since July 2009. The Institute for Supply Management said Monday that its index of manufacturing conditions fell 49.5 from October's 51.7. Numbers above 50 signal growth, while those below indicate contraction.

One reason for the downturn, the trade group said, was that businesses are concerned about the so-called fiscal cliff, which is a package of tax increases and government spending cuts that will take effect in 2013 unless lawmakers take action. Worries about automatic tax increases cut demand for factory orders and manufacturing jobs.

President Barack Obama and Republican lawmakers have yet to work out a budget deal as the clock continues ticking toward the year-end deadline.

European stocks rose slightly in early trading. Britain's FTSE 100 was marginally lower at 5,868.17. Germany's DAX added 0.2 percent to 7,445.87. France's CAC-40 rose 0.7 percent to 3,591.11.

U.S. stock futures didn't move much ahead of the opening bell. Dow Jones industrial futures rose slightly to 12,954. S&P 500 futures were nearly unchanged at 1,407.30.

Ric Spooner, chief market analyst at CMC Markets in Sydney, said most analysts think U.S. political leaders will negotiate some kind of budget deal before the deadline. Still, any agreement will have to include some tax increases and spending cuts that will impinge on the growth of the world's No. 1 economy.

"It's important to remember that there will still be a significant fiscal drag on the U.S. economy next year. So I think markets have arrived at a level that reflects that state of affairs, or close to it," Spooner said. "The market has arrived around a level which reflects the risk that is still out there."

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